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The COVID-19 pandemic has put extraordinary pressure on the operational readiness of our military installations. Base commanders have faced many unknowns about how to keep installations operating reliably amidst health concerns and stay-at-home orders. For the more than 600 utility systems owned and operated by partners through the Department of Defense’s (DoD) utility privatization (UP) program, they showed their value in having utility expertise and emergency plans in place ready to support military installations, no matter the challenge.
Reliability, stability, efficiency and safety have been hallmarks of the UP program for two decades. It has given Army leaders the confidence that electricity, water, and other services will always be running and ready to support their mission. Driven by data, adherence to state and local laws, industry standards, advances in technology, and a competitive procurement process, the UP program has been one of the most successful public-private partnership programs across DoD.
It’s easy to forget this history, especially as installations look for ways to reduce costs as installation operations and maintenance (O&M) budgets become tighter. Last month’s RAND Arroyo Center report titled, “Alternatives for Reducing Army Installation Utility Bills While Enhancing Installation Readiness,” attempts to offer a one-size-fits-all solution for addressing these issues that does not seem to understand the value of UP.
As an organization of system owners that partner with the military to provide safe, reliable, and efficient utility system operations, Utility Privatization Partners (UPP) believes this report offers advice to the Army that is anecdotal and short-sighted. We believe the report attempts to challenge the efficacy of the UP program by not clearly distinguishing between the cost of obtaining electricity, water, or gas, from the cost of managing the system. Additionally, the report suggests models (such as community partnerships) may be a viable alternative to UP contracts. The study fails to provide evidence of how these models would work, as well as the additional costs that would be incurred. The report recommends that the Army should find new tools to manage utilities, but it fails to cite the value that long-term UP contracts have brought to the military.
There is no disagreement that military utility costs are rising, but this is not due to UP contracts. There are many factors to rising utility costs; this includes the growing mission and footprint of the U.S. military, increased regulations and the failing state of many non-UP utility systems. The cost of buying a commodity is completely different from the cost structure of managing that utility once it gets to the installation. DoD can find new ways to reduce its commodity costs of utilities while still maintaining the tested and proven model it uses for managing systems reliably, safely, and efficiently – UP.
The report suggests the example of community partnerships, managed through Intergovernmental Support Agreements (IGSA), as an alternative to a UP contract. IGSAs provide a mechanism for sharing services between installations and communities, but the 10-year limit on agreements would make the cost of recapitalizing an entire utility system, that often need substantial work, infeasible. The rigor of the UP program in terms of data, monitoring, capability, and industry standards cannot be matched through a sole-source limited scope community partnership. The water connection partnership cited in the report is not comparable in size and scope to a UP contract and takes place on an installation where utilities have already been privatized.
If there is a situation where a community feels it can more efficiently recapitalize and operate a local installation utility system, then it should participate in the UP solicitation process. This existing well proven process provides the military with a fair way to competitively procure utilities and choose the lowest cost partner while receiving the best service for their needs.
As an organization of system owners who are among the companies that manage the majority of the military utilities, we know UP contracts provide the military with a safe, reliable and efficient model backed by empirical data to demonstrate these benefits. Through UP, each service can select the company with the best expertise to meet their installation’s requirements. This includes highly respected companies that are industry leaders in managing utilities for thousands of communities around the country. UP system owners have shown their ability to be innovative and adaptable, adjusting to ever-changing regulation, policy and industry best practices, including the recent focus on cybersecurity and resilience.
As with any long-term partnership, there are opportunities for innovation and strengthening of the model, and UP system owners stand ready to make that happen. UP system owners seek to collaborate with communities and finds ways to advance complimentary projects that improve the resilience of Army installations.
UP is a good news story for the Army on how public-private partnerships can work successfully and provide real value to installations. Together, we will manage utilities in a way that never creates a risk to our military’s readiness and resilience.
More information about UPP is available at www.utilitiesprivatization.org
Photo by Airman Daniel Garcia